You can probably expect to pay between $350 and $650 for a home appraisal.

But don’t think $650 is a top limit. If you’re buying with a jumbo mortgage an outsized, hugely expensive home in an area where appraisers’ fees are high, you could find yourself with a bill in four figures.

In this article, we will be answering the following questions:

• What is a home appraisal?
• What is the purpose of a home appraisal?
• What affects the cost of a home appraisal?
• What does the home appraisal include?
• Who pays for a home appraisal?
• How should you prepare for a home appraisal (if you’re selling or refinancing)?
• What should you ask a home appraiser before hiring him or her?

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What is a home appraisal?

An appraisal is simply a valuation of a piece of residential real estate by an independent, professional valuer. In other words, the appraiser will determine the market value of the home, based on his or her knowledge of the local property market.

Much of an appraiser’s work involves “comps” — short for comparatives or comparable homes. This involves comparing the home with recent sales of other, similar, nearby homes. But it also involves a judgment of how your property matches up to those homes.

If the sale of a next-door neighbor’s identical property closed yesterday, that can be helpful. But even then, yours may not be worth the same. The appraiser will ask herself whether the local property market has moved up or down quickly enough over the few weeks since the sale was agreed to make that price out of date.

And she’ll have to decide just how identical the two homes are:

• Is the accommodation’s square footage the same in each?
• Are the yards the same size?
• Is one on a more desirable corner plot?
• Does one have better views?
• Has one had more, more-recent or better-quality upgrades than the other?
• Have they both been maintained equally well or badly?
• Is there an addition on either building or are there extra structures in the yard of one?

That list can go on. And that’s for an “identical” property. Any differences will have to be identified and given a dollar value when the homes on which comps are based are not so similar or are in nearby neighborhoods.

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What is the purpose of a home appraisal?

The vast majority of home appraisals are ones required by mortgage lenders to ensure that the property’s value is enough to properly secure the mortgage loan. From the lender’s point of view, if you pay $250,000 for a home with a market value of $200,000, your $50,000 down payment is no down payment at all.

Of course, the lender might still OK that home loan if you make a $90,000 down payment because its loan is adequately secured: it has a $40,000 cushion (20% of the $200,000 real value) if you default. But they are likely to think you’re weird for knowingly paying too much.

Naturally, it’s not just mortgage borrowers who pay for appraisals. Wise home buyers often commission them even if they’re paying cash and there’s no lender breathing down their necks. It’s a good way to ensure a sound investment. And, if one’s paying too much, he can use his appraiser’s report (just as someone requiring a mortgage can) to negotiate a lower price with the seller.

Sometimes a seller will get an appraisal. We’ll explore why that can be a good idea in a minute.

Finally, you may find an appraisal useful when reporting the estate taxes due if you’re bequeathed a home.

What is the difference between a home appraisal and a home inspection?

Home appraisers are experts at valuing property while a home inspector is an expert in building structures and defects. It’s important to get this distinction right. Because a lot could end up riding on it.

Home appraisers may have picked up some knowledge of structural issues and other building defects over the years. But they may not. Your report may mention any concerns they have. And good ones will usually say something. Perhaps, “I recommend that you have this possible defect investigated,” or just, “I recommend a home inspection.”

But it’s not their job to go beyond putting a value on a home. And you likely have no legal recourse to compensation if they miss something or say nothing.

A home inspection is different. The inspector will identify any potential problems with the structure or systems of your potential new home.

If you’re buying an older home, or spot something (a crack perhaps, or a damp patch) that troubles you, you could save yourself a pile of money by arranging a home inspection. But make sure your inspector carries adequate professional indemnity insurance. If you have to sue because he missed something serious, you’re more likely to get compensation from an insurer.

What affects the cost of a home appraisal?

The cost of an appraisal is likely to be affected by the state in which you reside. Appraisers have to eat. So they may charge more in a state with a high cost of living than in one with a lower one.

For example, according to the Bureau of Labor Statistics, the annual mean wage for an appraiser in 2018 was $40,710 in West Virginia but $84,130 in California. And, even within states, those practicing in thriving cities tend to get higher pay than their more rurally-based colleagues.

All 50 states require home appraisers to be licensed. But the requirements can vary between each. And some practitioners are additionally Certified Residential Appraisers, who have higher qualifications and may command higher fees.

Home characteristics that can affect the home appraisal cost

So those are factors related to the appraiser that can affect costs. But the characteristics of the home to be appraised can have an even greater impact on those. Such characteristics include:

• Square footage. The bigger the size of the home, the more work for the appraiser.
• Location. How far does the appraiser have to travel to view the home (mileage and time costs) and might it be inaccessible during the winter?
• Home’s rarity or uniqueness. It’s difficult or impossible to find comps for rare types of homes. So an appraiser has to work harder if you want a valuation of a geodesic dome, a log cabin or something similarly atypical.
• Property type. Are you buying a single-family home, a condo, a townhouse …? It makes a difference to the work an appraiser must do.
• Condition of the home. It can be harder to appraise a home with serious condition issues.

If you plan to get a jumbo mortgage, this is likely to impact the cost of your appraisal as jumbo loans tend to involve bigger sums and larger homes. So lenders may demand more from your appraiser. And some even require two separate appraisals to approve the biggest of these loans.

Appraisals and closing costs

When it comes to closing costs, there are some services that you’re able to shop around for yourself. So you may be able to shave some dollars off bills for your title search or pest inspection.

But appraisal fees do not fall into that category. That’s because mortgage lenders are bound by law to order the appraisal through an independent Appraisal Management Company (AMC) to prevent inflated home values. Your lender will tell you how much you have to pay and you must pay that — or find a different lender. Your mortgage quote will tell you the accurate appraisal cost.

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What does the home appraisal include?

Many appraisers use Freddie Mac’s Uniform Residential Appraisal Report as a template for their work, regardless of whether Freddie is involved in the relevant mortgage. Want to see the scope of a typical report? You can download the six-page document as a PDF using that link to Freddie’s website.

The form includes (among many other things):

• Property details
• Neighborhood characteristics
• Recent home price trends
• Plot dimensions, shape and view
• Building’s general description and foundations
• Interior and exterior characteristics, materials and condition
• Types and numbers of rooms
• Amenities and appliances
• Description of general condition, including obviously needed repairs
• Breakdown of how subject home compares with three comps
• The appraised value

It really is a comprehensive report.

Who pays for an appraisal?

Most commonly, the homebuyer pays for the appraisal.

As mentioned above, the mortgage lender appoints an appraiser and you pay the fee within your closing costs. One good thing: you normally get a copy of the report. So, if the appraised value comes in under the sale price or identifies issues, you have some serious ammunition to help you renegotiate the deal.

When would a homeowner get an appraisal?

If a seller is motivated to get a quick sale, she might offer to pay the buyer’s appraisal fee and possibly other closing costs.

But when might homeowners commission appraisals themselves? Here are some such circumstances:

• When knowing the value of the home helps with financial planning. Perhaps when deciding if and when to make investments or to borrow using the home as security.
• To assist in deciding what, if any, renovation or home improvement projects are viable. Sometimes a home’s location or other characteristics make large, costly projects financially unviable
• When selling to a friend or family member. Nobody wants to rip off or be ripped off. And an independent, professional appraisal makes both easy to avoid.
• To determine estate tax liabilities if you’ve inherited the home.

In many parts of the country, appraisals are fairly inexpensive. And they can be an affordable way to help you better understand your financial options.

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How to prepare for a home appraisal as a home seller

Let’s assume that you’re a seller who wants to maximize the market value of your home. You’ll likely have already done the cleaning, decorating and decluttering necessary to market your property most effectively.

But, suppose you were caught off-guard by an early buyer. Do all that now. This stuff matters to home appraisers.

Remember, an appraiser is different from a home inspector. The latter might look past your hoarding habit, the rusty hulk of a car on your front lawn and your garish taste in wallpaper. All she’s interested in is any structural or other defects in your home.

But a home inspector isn’t like that. He’s there to establish your home’s market value. And things like curb appeal, mainstream decor, cleanliness, an uncluttered interior and a well-maintained yard genuinely affect the value of a home.

So, while his professional eye may allow him to see past poor presentation to the bones of the building, he should take everything that lowers your home’s worth into account.

Create a pack for your appraiser

You shouldn’t seek to compromise your appraiser’s independence or integrity. But it’s perfectly fine for you to help her with a pack of documents that could aid her in establishing the true value of your home. You might be able to find some recent comps that she might miss. She’ll likely find her own, too. But yours can’t do any harm.

Document in your pack any home improvements, repairs and maintenance you’ve had done. Invoices from contractors, plumbers and electricians — and those for materials — are useful. As are any guarantees or warranties that are current, along with building inspection certificates that show work has been up to code.

You might win brownie points by also providing plans of your building and plot. They’re unlikely to affect your valuation, but they could make the appraiser well disposed toward you.

Finally, if you think your appraiser might not be familiar with your neighborhood, do a bit of online research and print out some favorable statistics — if there are any. It’s easy to find crime levels, the attainments of local schools, local average earnings and other things that demonstrate the desirability of your area.

What should you ask an appraiser before hiring him or her?

In most cases, the lender will choose a home buyer’s appraisal for him or her. But in some cases, you may want to order your own. For instance, if you’re selling the home, or have just inherited a home and would like to know its value.

In those cases, you can hire your own appraiser. But how do you find a good one?

The most important thing to know about a professional appraiser is that he’s licensed and qualified. You may be able to run an online check with your state licensing board before you even engage. Otherwise, ask to see his license and Appraiser Qualifications Board (Appraisal Foundation) certificate.

But those are just a minimum. So ask a few more questions and expect proper, confidence-inspiring answers:

• How experienced are you in appraising homes like mine?
• How well do you know my neighborhood?
• For how many years have you been an appraiser locally?
• What will your final bill be?
• What format will your report take?
• Will it meet the standards of the Uniform Standards of Professional Appraisal Practice and will you use Freddie Mac’s Uniform Residential Appraisal Report?

Some appraisers are better than others. When you’re choosing yours, pick a good one.

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